Dollar General Corporation
Mar 22, 2011

Dollar General Reports Record Fourth Quarter and Full Year 2010 Financial Results

GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported record sales, operating profit and net income for its fiscal 2010 fourth quarter (13 weeks) and full year (52 weeks) ended January 28, 2011.

"Dollar General had a great year in 2010," said Rick Dreiling, chairman and chief executive officer. "While weather impacted our sales momentum in the second half of the fourth quarter, we effectively balanced our sales, delivering gross margin expansion, expense leverage and excellent financial results.

"Dollar General is a strong company with a tremendous foundation for continued growth," Mr. Dreiling said. "Our track record of executing our key initiatives over the past three years gives me confidence that the Dollar General team can successfully execute our 2011 goals. We are off to a strong start in 2011. Even in a challenging macroeconomic environment, we expect to deliver strong financial performance in 2011, including top-line growth of 11 to 13 percent and same-store sales growth of 3 to 5 percent."

Fiscal Fourth Quarter 2010 Highlights

Fourth quarter net sales increased 9.4 percent to $3.49 billion, including a same-store sales increase of 3.8 percent on top of a 7.4 percent same-store sales increase in the 2009 fourth quarter. Same-store customer traffic and average transaction amounts increased in both the 2010 and 2009 periods.

Operating profit, as a percentage of sales, improved 295 basis points to 11.7 percent in the 2010 fourth quarter. Adjusted operating profit increased 19 percent to $413 million, and as a percentage of sales, improved 95 basis points to 11.8 percent, driven by both the expansion of the Company's gross profit rate and a reduction in selling, general and administrative ("SG&A") expenses as a percentage of sales.

Fourth quarter gross profit, as a percentage of sales, increased by 23 basis points to 32.4 percent in 2010, another record fourth quarter gross profit rate. Inflationary pressures in the 2010 fourth quarter led to a LIFO charge of $4.6 million compared to a LIFO credit of $2.0 million in the 2009 fourth quarter, or a net $6.6 million (approximately 20 basis points) unfavorable impact on the change in gross profit. The gross profit rate was favorably impacted by lower inventory shrinkage and higher net markups on sales resulting from the Company's category management efforts throughout the year and increased volumes which contributed to the ability to reduce purchase costs from vendors.

Selling, general and administrative expenses were $722 million, or 20.7 percent of sales, in the 2010 fourth quarter, including charges of $4.7 million relating to a secondary offering of the Company's common stock. SG&A expenses in the 2009 fourth quarter were $746 million, or 23.4 percent of sales. Adjusted SG&A expenses, as a percentage of sales, of 20.6 percent in the 2010 fourth quarter, reflect a decrease of 72 basis points from adjusted SG&A expenses, as a percentage of sales, of 21.3 percent in the 2009 fourth quarter, primarily due to lower incentive compensation than in the 2009 period and decreases in repairs and maintenance expense, severance costs, outside consulting and advertising expense. In addition, other cost reduction and productivity initiatives and the impact of increased sales resulted in certain costs, including store labor, increasing at a rate lower than the 9.4 percent increase in sales.

Interest expense decreased by $13 million to $66 million in the 2010 fourth quarter due to lower outstanding borrowings.

The effective income tax rate in the 2010 fourth quarter was 35.0 percent, which was below the Company's forecast. The fourth quarter 2010 income tax rate was lower than expected due to the effective resolution and release of an unrecognized tax benefit from a single state. This release, including related interest accruals and net of federal income tax, reduced the fourth quarter income tax expense by $6.8 million, or approximately $0.02 per diluted share.

Net income for the 2010 fourth quarter was $223 million, or diluted earnings per share ("EPS") of $0.64, compared to net income of $87 million, or diluted EPS of $0.26, in the fourth quarter of fiscal 2009. Adjusted net income increased 30 percent to $226 million, or adjusted diluted EPS of $0.65, in the 2010 fourth quarter over adjusted net income in the 2009 fourth quarter of $173 million, or adjusted diluted EPS of $0.51. Fourth quarter 2010 adjusted EPS includes the $0.02 per diluted share benefit resulting from the effective resolution and release of the unrecognized tax benefit discussed above.

Full Year 2010 Financial Results

Full year 2010 net sales increased 10.5 percent to $13.04 billion compared to net sales of $11.80 billion in 2009. Same-store sales increased 4.9 percent in 2010 and 9.5 percent in 2009 with customer traffic and average transaction amounts contributing to the sales increases in both years.

Full year operating profit increased by 34 percent to $1.27 billion, or 9.8 percent of sales, in 2010 compared to $953 million, or 8.1 percent of sales, in 2009. Adjusted operating profit increased 27 percent to $1.29 billion, or 9.9 percent of sales, in 2010 compared to 8.7 percent of sales in 2009, a 127 basis point improvement, reflecting strong and balanced improvement in both gross profit and SG&A expenses, as a percentage of sales.

The Company's gross profit rate increased 76 basis points to 32.0 percent of sales in 2010 from 31.3 percent of sales in 2009. The increase in the gross profit rate was primarily due to higher net markups resulting from the Company's continued category management efforts and increased volumes which have contributed to the ability to reduce purchase costs from vendors, partially offset by higher markdowns. Inflationary pressures, which accelerated in the 2010 fourth quarter, resulted in a LIFO charge of $5.3 million, decreasing gross profit in 2010, compared to a LIFO credit of $2.5 million, increasing gross profit in 2009, or a net $7.8 million unfavorable impact on the change in gross profit.

Full year SG&A expenses in 2010 were $2.90 billion, or 22.3 percent of sales, compared to full year 2009 SG&A expenses of $2.74 billion, or 23.2 percent of sales. Adjusted SG&A expenses, as a percentage of sales, for 2010 were 22.1 percent compared to 22.6 percent in 2009, a reduction of 50 basis points. Decreases in incentive compensation, healthcare expense, consulting fees and severance contributed to the overall decrease in SG&A as a percentage of sales for the year. In addition, the impact of increased sales and other cost reduction and productivity initiatives resulted in certain costs increasing at a rate lower than the 10.5 percent increase in sales, including lower waste management costs reflecting our recycling efforts. Debit card processing fees increased at a higher rate than the increase in sales, primarily as the result of increased usage.

Interest expense in 2010 was $274 million, a decrease of $72 million from 2009, primarily due to lower average outstanding borrowings, resulting from the early repurchase of outstanding long-term obligations.

The effective income tax rate for 2010 was 36.3 percent compared to a rate of 38.5 percent for 2009. The 2010 income tax expense reflects the fourth quarter effective resolution and release of an unrecognized tax benefit from a single state. This release, including related interest accruals and net of federal income tax, reduced the Company's income tax expense by $6.8 million, or approximately $0.02 per diluted share.

The Company reported net income of $628 million, or diluted EPS of $1.82, for fiscal year 2010 compared to net income of $339 million, or diluted EPS of $1.04, for fiscal year 2009. Adjusted net income increased 53 percent to $649 million, or $1.88 per diluted share, in fiscal 2010, compared to $425 million, or $1.31 per share, in 2009. 2010 adjusted diluted EPS includes the $0.02 per diluted share benefit resulting from the effective resolution and release of the unrecognized tax benefit discussed above.

Merchandise Inventories

As of January 28, 2011, total merchandise inventories, at cost, were $1.77 billion compared to $1.52 billion as of January 29, 2010, an increase of 9 percent on a per-store basis. Annual inventory turns were 5.2 times in 2010.

Long-Term Obligations

As of January 28, 2011, outstanding long-term obligations, including the current portion, were $3.29 billion, a decrease of $115 million from the end of fiscal 2009, resulting from open market purchases in May and September of the Company's senior notes due 2015. The 2010 repurchases resulted in pretax losses totaling $15 million reflected in other (income) expense in the consolidated statements of operations.

Capital Expenditures

Total additions to property and equipment in 2010 were $420 million, including: $156 million for improvements, upgrades, remodels and relocations of existing stores; $100 million for new leased stores; $91 million for stores purchased or built by the Company; $45 million for distribution and transportation-related capital expenditures; and $22 million for information systems upgrades and technology-related projects. During 2010 we opened 600 new stores and remodeled or relocated 504 stores.

2011 Financial Outlook

The Company remains committed to its focus on productive sales growth, increasing gross margins, leveraging process improvements and information technology to reduce costs and strengthening and expanding Dollar General's culture of serving others.

For the 53-week fiscal year ending February 3, 2012 ("fiscal 2011"), the Company expects total sales to increase 11 to 13 percent, including sales in the 53rd week which are expected to be approximately 200 basis points of the total increase. Same-store sales, based on a comparable 52-week period are expected to increase 3 to 5 percent. Operating profit for the 2011 53-week period is expected to increase 14 to 16 percent over the 2010 52-week adjusted operating profit, driven by sales, gross profit rate improvements related to increased penetration of the Company's private brands, development of additional direct sourcing opportunities, additional shrink improvement and distribution and transportation efficiencies, and further transformation of the Company's seasonal, home and apparel categories, in addition to improved expense management.

The Company expects full year interest expense to be in the range of $220 million to $230 million. The Company intends to redeem some or all of its senior notes at the first scheduled call date in July 2011 or later or to retire some of the notes through open market repurchases, likely to result in pretax losses in excess of $40 million. If the Company does not redeem the notes, interest expense will likely exceed the guidance, and the losses will not occur.

Diluted EPS for the 53-week fiscal year, adjusted to exclude any losses and the related income tax effect resulting from redemption of the senior notes, is expected to be approximately $2.20 to $2.30, based on 346 million weighted average diluted shares. The full year 2011 effective tax rate is expected to be approximately 38 percent. The 53rd week is expected to contribute approximately $0.06 per diluted share.

The Company plans to open approximately 625 new stores and to remodel or relocate a total of approximately 550 stores in 2011. Capital expenditures are expected to be in the range of $550 million to $600 million. Approximately 55 percent of capital spending is for investment in store growth and development, including new stores, remodels, relocations and purchases of existing store locations; approximately 25 percent is for special projects including approximately $90 million for a new distribution center in Bessemer, Alabama; the remaining 20 percent is for maintenance capital.

Conference Call Information

The Company will hold a conference call on Tuesday, March 22, 2011, at 9:00 a.m. CDT/10:00 a.m. EDT, hosted by Rick Dreiling, chairman and chief executive officer, and David Tehle, chief financial officer. If you wish to participate, please call (866) 710-0179 at least 10 minutes before the conference call is scheduled to begin. The pass code for the conference call is "Dollar General." A live web cast of the call will be available at www.dollargeneral.com under "Investor Information, Conference Calls and Investor Events." A replay of the conference call will be available until Tuesday, April 5, 2011, and will be accessible online or by calling (334) 323-7226. The pass code for the replay is 41921223.

Non-GAAP Disclosure

Certain financial information provided in this press release and the accompanying tables has not been derived in accordance with generally accepted accounting principles ("GAAP"), including adjusted SG&A expenses, adjusted operating profit, adjusted net income, adjusted diluted EPS, EBITDA, and adjusted EBITDA. Reconciliations of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules. Non-GAAP information should not be considered a substitute for any information derived or calculated in accordance with GAAP.

The Company believes that providing comparisons to operating profit, net income, diluted earnings per share and SG&A expenses, adjusted for the items shown in the accompanying reconciliations, provides useful information to the reader in assessing the Company's operating performance. In summary, adjusted SG&A expenses and adjusted operating profit in the 2010 fourth quarter and 2010 full year exclude pretax charges totaling $4.7 million and $19.7 million, respectively, relating to administrative expenses and the acceleration of equity appreciation rights in connection with secondary offerings of the Company's common stock by certain shareholders (the "Secondary offerings"). In the 2009 fourth quarter and full year, adjusted SG&A expenses and adjusted operating profit exclude pretax charges of $58.8 million to terminate a sponsor advisory agreement and $9.4 million resulting from the acceleration of certain equity-based compensation in connection with the Company's initial public offering of its common stock ("IPO"). In addition to the non-GAAP adjustments to SG&A expenses and operating profit discussed herein and the related income tax effect of these adjustments, adjusted net income and adjusted diluted EPS exclude losses of $14.6 million ($8.8 million, net of income taxes) for the full year 2010 and $55.3 million ($33.8 million, net of income taxes) for the fourth quarter and full year 2009 resulting from repurchases of long-term obligations.

The Company believes that the presentation of EBITDA and adjusted EBITDA is appropriate to provide additional information about the calculation of the senior secured incurrence test, a material financial ratio in the Company's credit agreements. Adjusted EBITDA is a material component of that ratio.

The non-GAAP measures discussed above are not measures of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as alternatives to net income, operating income, cash flows from operations or any other performance measures determined in accordance with GAAP. Additionally, EBITDA and adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments, debt service requirements and replacement of fixed assets. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company's financial results as reported under GAAP.

Forward-Looking Statements

This press release contains forward-looking information, such as the information in the section entitled "2011 Financial Outlook." The words "believe," "anticipate," "project," "plan," "schedule," "on track," "expect," "estimate," "objective," "forecast," "goal," "intend," "committed," "will likely result," or "will continue" and similar expressions generally identify forward-looking statements. These matters involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from that expressed or implied by these forward-looking statements. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. Factors that may result in actual results differing materially from such forward-looking information include, but are not limited to:

Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they were made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

About Dollar General Corporation

Dollar General Corporation has been delivering value to shoppers for more than 70 years. Dollar General helps shoppers Save time. Save money. Every day!(R) by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, house wares and seasonal items at low everyday prices in convenient neighborhood locations. With 9,372 stores in 35 states as of January 28, 2011, Dollar General has more retail locations than any retailer in America. In addition to high quality private brands, Dollar General sells products from America's most-trusted manufacturers such as Procter & Gamble, Kimberly-Clark, Unilever, Kellogg's, General Mills, Nabisco, Hanes, PepsiCo and Coca-Cola. Learn more about Dollar General at www.dollargeneral.com.

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
     
January 28, January 29,
2011   2010
ASSETS
Current assets:
Cash and cash equivalents $ 497,446 $ 222,076
Merchandise inventories 1,765,433 1,519,578
Income taxes receivable - 7,543
  Prepaid expenses and other current assets     104,946       96,252  
  Total current assets     2,367,825       1,845,449  
Net property and equipment     1,524,575       1,328,386  
Goodwill     4,338,589       4,338,589  
Intangible assets, net     1,256,922       1,284,283  
Other assets, net     58,311       66,812  
Total assets   $ 9,546,222     $ 8,863,519  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 1,157 $ 3,671
Accounts payable 953,641 830,953
Accrued expenses and other 347,741 342,290
Income taxes payable 25,980 4,525
  Deferred income taxes payable     36,854       25,061  
  Total current liabilities     1,365,373       1,206,500  
Long-term obligations     3,287,070       3,399,715  
Deferred income taxes payable     598,565       546,172  
Other liabilities     231,582       302,348  
Total liabilities     5,482,590       5,454,735  
 
Commitments and contingencies
 
Redeemable common stock     9,153       18,486  
 
Shareholders' equity:
Preferred stock - -
Common stock 298,819 298,013
Additional paid-in capital 2,945,024 2,923,377
Retained earnings 830,932 203,075
  Accumulated other comprehensive loss     (20,296 )     (34,167 )
  Total shareholders' equity     4,054,479       3,390,298  
Total liabilities and shareholders' equity   $ 9,546,222     $ 8,863,519  

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
         
 
For the Quarter (13 Weeks) Ended
January 28, % of Net January 29, % of Net
2011   Sales   2010   Sales
Net sales $ 3,486,104 100.00 % $ 3,185,785 100.00 %
Cost of goods sold     2,355,951     67.58 %     2,160,396     67.81 %
Gross profit 1,130,153 32.42 % 1,025,389 32.19 %
Selling, general and administrative expenses     721,902     20.71 %     746,456     23.43 %
Operating profit 408,251 11.71 % 278,933 8.76 %
Interest income (92 ) 0.00 % (9 ) 0.00 %
Interest expense 65,629 1.88 % 78,952 2.48 %
Other (income) expense     118     0.00 %     55,757     1.75 %
Income before income taxes 342,596 9.83 % 144,233 4.53 %
Income tax expense     120,050     3.44 %     57,036     1.79 %
Net income   $ 222,546     6.38 %   $ 87,197     2.74 %
 
Earnings per share:
Basic $ 0.65 $ 0.26
Diluted $ 0.64 $ 0.26
Weighted average shares:
Basic 341,305 337,355
Diluted 345,317 340,983

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
         
 
For the Year (52 Weeks) Ended
January 28, % of Net January 29, % of Net
2011   Sales   2010   Sales
Net sales $ 13,035,000 100.00 % $ 11,796,380 100.00 %
Cost of goods sold     8,858,444     67.96 %     8,106,509     68.72 %
Gross profit 4,176,556 32.04 % 3,689,871 31.28 %
Selling, general and administrative expenses     2,902,491     22.27 %     2,736,613     23.20 %
Operating profit 1,274,065 9.77 % 953,258 8.08 %
Interest income (220 ) 0.00 % (144 ) 0.00 %
Interest expense 274,212 2.10 % 345,744 2.93 %
Other (income) expense     15,101     0.12 %     55,542     0.47 %
Income before income taxes 984,972 7.56 % 552,116 4.68 %
Income tax expense     357,115     2.74 %     212,674     1.80 %
Net income   $ 627,857     4.82 %   $ 339,442     2.88 %
 
Earnings per share:
Basic $ 1.84 $ 1.05
Diluted $ 1.82 $ 1.04
Weighted average shares:
Basic 341,047 322,778
Diluted 344,800 324,836

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
 
      For the Year (52 Weeks) Ended
January 28, January 29,
2011   2010
Cash flows from operating activities:
Net income $ 627,857 $ 339,442

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 254,927 256,771
Deferred income taxes 50,985 14,860
Tax benefit of stock options (13,905 ) (5,390 )
Loss on debt retirement 14,576 55,265
Non-cash share-based compensation 15,956 17,295
Non-cash inventory adjustments and asset impairments 7,607 647
Other non-cash gains and losses 5,942 7,920
Change in operating assets and liabilities:
Merchandise inventories (251,809 ) (100,248 )
Prepaid expenses and other current assets (10,157 ) (7,298 )
Accounts payable 123,424 106,049
Accrued expenses and other liabilities (42,428 ) (12,643 )
Income taxes 42,903 1,153
      Other     (1,194 )     (1,000 )
Net cash provided by operating activities     824,684       672,823  
 
Cash flows from investing activities:
Purchases of property and equipment (420,395 ) (250,747 )
  Sale and insurance proceeds related to property and equipment     1,448       2,701  
Net cash used in investing activities     (418,947 )     (248,046 )
 
Cash flows from financing activities:
Issuance of common stock 631 443,753
Issuance of long-term obligations - 1,080
Repayments of long-term obligations (131,180 ) (785,260 )
Payment of cash dividends and related amounts - (239,731 )

Repurchases of common stock and settlement of equity awards, net of employee taxes paid

(13,723 )

(5,928

)
  Tax benefit of stock options     13,905       5,390  
Net cash used in financing activities     (130,367 )     (580,696 )
 
Net increase (decrease) in cash and cash equivalents 275,370 (155,919 )
Cash and cash equivalents, beginning of period     222,076       377,995  
Cash and cash equivalents, end of period   $ 497,446     $ 222,076  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 244,752 $ 328,433
Income taxes $ 314,123 $ 187,983
 
Supplemental schedule of non-cash investing and financing activities:

Purchases of property and equipment awaiting processing for payment, included in Accounts payable

$ 29,658 $ 30,393
Purchases of property and equipment under capital lease obligations $ - $ 50

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
   
Sales by Category (in thousands)
 
For the Quarter (13 Weeks) Ended
January 28, 2011   January 29, 2010 % Change
Consumables $ 2,424,578 $ 2,169,872 11.7 %
Seasonal 585,137 561,696 4.2 %
Home products 247,286 232,897 6.2 %
Apparel   229,103   221,320   3.5 %
Net sales $ 3,486,104 $ 3,185,785   9.4 %
 
 
 
For the Year (52 Weeks) Ended
January 28, 2011   January 29, 2010 % Change
Consumables $ 9,332,119 $ 8,356,381 11.7 %
Seasonal 1,887,917 1,711,471 10.3 %
Home products 917,638 869,772 5.5 %
Apparel   897,326   858,756   4.5 %
Net sales $ 13,035,000 $ 11,796,380   10.5 %
 
 
New Store Activity
 
For the Year (52 Weeks) Ended
January 28, 2011   January 29, 2010
 
Beginning store count 8,828 8,362
New store openings 600 500
Store closings   (56 ) (34 )
Net new stores   544   466  
Ending store count   9,372   8,828  
Total selling square footage (000's)   67,094   62,494  
 
Annual square footage growth 7.4 % 6.3 %

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(In millions, except per share amounts)
             
For the Quarter (13 Weeks) Ended  
January 28, % of Net January 29, % of Net Increase (decrease)
2011   Sales   2010     Sales $   %
 
Net sales   $ 3,486.1         $ 3,185.8       $ 300.3 9.4 %
 
Selling, general and administrative ("SG&A") $ 721.9 20.71 % $ 746.5 23.43 % $ (24.6 ) -3.3 %
Secondary offering expenses (0.4 ) -
Sponsor advisory fee termination - (58.8 )
  Acceleration of equity-based compensation     (4.3 )         (9.4 )    
  Adjusted SG&A   $ 717.2     20.57 %   $ 678.3     21.29 % $ 38.9 5.7 %
 
Operating profit $ 408.3 11.71 % $ 278.9 8.76 % $ 129.4 46.4 %
Secondary offering expenses 0.4 -
Sponsor advisory fee termination - 58.8
  Acceleration of equity-based compensation     4.3           9.4      
  Adjusted operating profit   $ 413.0     11.85 %   $ 347.1     10.90 % $ 65.9 19.0 %
 
Net income $ 222.5 6.38 % $ 87.2 2.74 % $ 135.3 155.2 %
Secondary offering expenses 0.4 -
Sponsor advisory fee termination - 58.8
Acceleration of equity-based compensation 4.3 9.4
  Repurchase of long-term obligations     -           55.3      
  Total adjustments     4.7           123.5      
  Income tax effect of adjustments     (1.7 )         (37.8 )    
  Net adjustments     3.0     0.09 %     85.7     2.69 %
  Adjusted net income   $ 225.5     6.47 %   $ 172.9     5.43 % $ 52.6 30.4 %
 
Diluted earnings per share:
As reported $ 0.64 $ 0.26
Adjusted $ 0.65 $ 0.51
 
Weighted average diluted shares 345.3 341.0
 
For the Year (52 Weeks) Ended  
January 28, % of Net January 29, % of Net Increase
2011   Sales   2010     Sales $   %
 
Net sales   $ 13,035.0         $ 11,796.4       $ 1,238.6 10.5 %
 
Selling, general and administrative ("SG&A") $ 2,902.5 22.27 % $ 2,736.6 23.20 % $ 165.9 6.1 %
Secondary offering expenses (1.1 )

-

Sponsor advisory fee termination - (58.8 )
  Acceleration of equity-based compensation     (18.6 )         (9.4 )    
  Adjusted SG&A   $ 2,882.8     22.12 %   $ 2,668.4     22.62 % $ 214.4 8.0 %
 
Operating profit $ 1,274.1 9.77 % $ 953.3 8.08 % $ 320.8 33.7 %
Secondary offering expenses 1.1

 

-
Sponsor advisory fee termination - 58.8
  Acceleration of equity-based compensation     18.6           9.4      
  Adjusted operating profit   $ 1,293.8     9.93 %   $ 1,021.5     8.66 % $ 272.3 26.7 %
 
Net income $ 627.9 4.82 % $ 339.4 2.88 % $ 288.5 85.0 %
Secondary offering expenses 1.1

 

-
Sponsor advisory fee termination - 58.8
Acceleration of equity-based compensation 18.6

 

9.4
  Repurchase of long-term obligations     14.6           55.3      
  Total adjustments     34.3           123.5      
  Income tax effect of adjustments     (13.0 )         (37.8 )    
  Net adjustments     21.3     0.16 %     85.7     0.73 %
  Adjusted net income   $ 649.2     4.98 %   $ 425.1     3.60 % $ 224.1 52.7 %
 
Diluted earnings per share:
As reported $ 1.82 $ 1.04
Adjusted $ 1.88 $ 1.31
 
Weighted average diluted shares 344.8 324.8

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Continued)
         
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
 
 
For the Quarter For the Year
(13 Weeks) Ended (52 Weeks) Ended
January 28, January 29, January 28, January 29,
(In millions) 2011   2010   2011   2010
 
Net income $ 222.6 $ 87.2 $ 627.9 $ 339.4
Add (subtract):
Interest income (0.1 ) - (0.2 ) (0.1 )
Interest expense 65.6 78.9 274.1 345.6
Depreciation and amortization 62.0 59.3 242.3 241.7
Income taxes   120.0       57.0       357.1       212.7  
EBITDA   470.1       282.4       1,501.2       1,139.3  
 
Adjustments:
Loss on debt retirement, net - 55.3 14.6 55.3
Loss on hedging instruments 0.1 1.5 0.4 0.5

Impact of markdowns related to inventory clearance activities, net of purchase accounting adjustments

- (0.7 ) -

(7.3

)
Advisory and consulting fees to affiliates - 59.1 0.1 63.5
Non-cash expense for share-based awards 3.2 9.3 16.0 18.7
Indirect merger-related costs 0.3 4.9 1.3 10.6
Other non-cash charges (including LIFO)   4.9       (2.2 )     11.5       6.6  
Total Adjustments   8.5       127.2       43.9       147.9  
Adjusted EBITDA $ 478.6     $ 409.6     $ 1,545.1     $ 1,287.2  

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Continued)
(Dollars in millions)
 
Senior Secured Incurrence Test
 
January 28, January 29,
2011   2010
Senior secured debt $ 1,984.4 $ 1,986.3
Less: cash   497.4     222.1
Senior secured debt, net of cash $ 1,487.0 $ 1,764.2
Adjusted EBITDA $ 1,545.1   $ 1,287.2

Ratio of senior secured debt, net of cash, to Adjusted EBITDA

1.0x   1.4x
 
 
 
Calculation of Ratio of Long-Term Obligations to Adjusted EBITDA
 
January 28, January 29,
2011   2010
Total long-term obligations $ 3,288.2 $ 3,403.4
Adjusted EBITDA $ 1,545.1   $ 1,287.2

Ratio of long-term obligations to Adjusted EBITDA

2.1x

 

2.6x

 
 
 
Calculation of Ratio of Long-Term Obligations, net of Cash, to Adjusted EBITDA
 
January 28, January 29,
2011   2010
Total long-term obligations $ 3,288.2 $ 3,403.4
Less: cash   497.4     222.1
Total long-term obligations, net of cash $ 2,790.8   $ 3,181.3
Adjusted EBITDA $ 1,545.1   $ 1,287.2

Ratio of long-term obligations, net of cash to Adjusted EBITDA

1.8x   2.5x

Dollar General Corporation
Investors:
Mary Winn Gordon, 615-855-5536
Emma Jo Kauffman, 615-855-5525
or
Media:
Tawn Earnest, 615-855-5209

Source: Dollar General Corporation

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